Critical federal report on for-profit University of Phoenix leads to $9.8 million fine

Updated:
Tuesday, September 14, 2004 10:02 AM EDT

PHOENIX (AP) _ The nation's largest for-profit university was fined $9.8 million by federal regulators who concluded it was so focused on boosting enrollment that it pressured recruiters to accept unqualified students.

The fine against the University of Phoenix was the largest ever imposed by the Department of Education.

The federal investigators' 45-page report detailed several examples of compensation and sales practices that the government said were illegal or unethical, according to Tuesday's editions of The Arizona Republic, which obtained the report.

The Department of Education oversees federal financial-aid programs and has strict rules against paying recruiters based on the number of students they enroll. It found the school evaluated recruiters and set salary incentives for them based on how many people they signed up and then tried to hide those practices from the government.

About 60 percent of the school's tuition revenue comes from financial aid.

Enrollment counselors interviewed by regulators told of a glassed-in isolation room where underperformers were put on display to work the phones under intense management supervision, according to the report.

The Apollo Group, the publicly traded parent company of the University of Phoenix, had announced last week that it agreed to pay $9.8 million to settle a year-old inquiry by the Department of Education. It did not admit any wrongdoing.

Todd Nelson, Apollo Group chairman and chief executive officer, called the regulators' criticism of the university's recruiting practices ``very, very unfair'' and inaccurate.

``That's not how we do it,'' he said.

The University of Phoenix, founded in 1976, offers bachelor's, master's and doctoral degrees, focusing on business and management, for working professionals. It has 151 campuses in 30 U.S. states, Puerto Rico and Canada, according to its Web site. As of May, it had 213,000 students, including nearly 110,000 attending its online campus, the Web site said.

The regulators said their report was based on site visits and interviews with more than 60 university employees and former employees. It did not address the school's educational quality.